Registering for Self Employment and Self Assessment
Anyone who earns income from self-employment in the UK must register with HMRC. This is necessary even if the work is part-time, occasional, or carried out alongside a full-time job. The government uses the Self Assessment system to collect Income Tax and National Insurance from self-employed individuals.
The UK tax year runs from 6 April to 5 April the following year. If you begin earning from self-employment during a tax year, you need to register for Self Assessment by 5 October of the following tax year. For example, if you begin work as a courier in May 2025, you must register by 5 October 2026.
Once registered, you will be responsible for submitting a Self Assessment tax return every year. In this return, you must report your income and claim any expenses incurred while running your business. The deadline for submitting an online return is 31 January following the end of the tax year. It’s your responsibility to ensure that all income is declared and the information provided is accurate.
Understanding Taxable Profits and Tax Bands
As a self-employed worker, you only pay tax on your profits, not your total income. Your profits are calculated as your income from business activities minus allowable business expenses. The more allowable expenses you claim, the lower your taxable profits, and in turn, the less tax you pay.
Every individual is entitled to a personal allowance, which is the amount you can earn before you start paying income tax. The standard personal allowance is currently £12,570 per year. If you earn less than this amount, you won’t have to pay income tax, although you may still need to pay National Insurance if your profits exceed certain thresholds.
Income above the personal allowance is taxed in bands:
- Between £12,571 and £50,270 is taxed at 20 percent
- Between £50,271 and £125,140 is taxed at 40 percent
- Above £125,140 is taxed at 45 percent
These rates apply to taxable income, which means any amounts after allowable expenses have been deducted.
National Insurance for Self-Employed Couriers
In addition to Income Tax, self-employed individuals are required to pay National Insurance contributions. These payments entitle you to certain state benefits, including the State Pension.
There are two types of National Insurance contributions relevant to self-employed individuals:
Class 2 contributions are required if your annual profits are £6,725 or more. These are charged at a flat weekly rate, currently £3.45.
Class 4 contributions apply if your annual profits are over £12,570. You pay 9 percent on profits between £12,570 and £50,270, and 2 percent on profits above £50,270.
Both types of contributions are calculated and paid through your Self Assessment tax return.
Importance of Good Record Keeping
Keeping thorough and accurate records of your income and expenses is essential. This not only helps you to complete your Self Assessment tax return correctly, but also ensures you can justify your claims in case HMRC asks for evidence. Without accurate records, you might forget to claim legitimate expenses or make errors that could result in fines or penalties.
You should retain receipts, invoices, bank statements, mileage logs, and any other documents related to your business. Whether you use a manual ledger, spreadsheets, or accounting software, the important thing is that your records are complete and up to date.
It’s advisable to set time aside weekly or monthly to log your expenses and update your income. Leaving everything until the tax return deadline can lead to mistakes and unnecessary stress.
What Are Allowable Expenses?
Allowable expenses are the costs you incur in the course of running your business. These can be deducted from your income when calculating your taxable profit. By claiming these deductions, you reduce the amount of tax and National Insurance you owe.
The key principle is that expenses must be incurred wholly and exclusively for business purposes. If you incur a cost that is partly for business and partly personal, you can only claim the business-use proportion.
Some general examples of allowable expenses relevant to couriers and delivery drivers include:
- Mobile phone bills, if the phone is used for work calls or apps related to deliveries
- Office supplies like pens, notebooks, or record-keeping materials
- Marketing costs such as social media adverts or flyers
- Costs of maintaining a business bank account or paying transaction fees
- Subscriptions to mapping or delivery tracking software
- Postage and packaging if relevant to your delivery services
It’s important to keep documentation to prove each of these expenses. Estimations without evidence are unlikely to be accepted if reviewed by HMRC.
Business Use Versus Personal Use
Many expenses in a courier’s business may also have a personal use element. For example, if you use your personal mobile phone to communicate with customers and also for personal use, you must estimate what portion of the use is for business. If 60 percent of your mobile phone use is for business, then you can claim 60 percent of your monthly bill as an expense.
Similarly, if you use your home internet for business-related communications or route planning, but also for personal browsing, you must apportion the cost reasonably. These calculations should be based on regular usage patterns and supported by evidence where possible.
Vehicles are one of the most significant areas where personal and business use needs to be carefully divided. If you use the same car for delivering packages and for personal travel, you can only claim for the portion of costs that relate to your business mileage.
Preparing for Your Tax Payments
Because your tax is not deducted at source when you’re self-employed, it’s your responsibility to put aside money to cover your tax bill. A good starting point is to save around 25 to 30 percent of your earnings in a separate account for taxes. This will ensure that when the payment deadlines arrive, you are not caught off guard.
Self-employed tax bills are usually due by 31 January following the end of the tax year. If your tax bill exceeds £1,000, HMRC may require you to make advance payments toward the next year’s bill through a system called payments on account. These payments are due in two parts—by 31 January and 31 July each year—and are based on your previous year’s tax bill.
For example, if your bill this year is £1,800, you may be asked to pay £900 in January and another £900 in July toward the following year. It’s important to understand this system and factor it into your cash flow planning.
Choosing an Accounting Method
As a self-employed person, you can choose between traditional and cash basis accounting for completing your Self Assessment return. Under traditional accounting, you record income and expenses by the date you invoice or are billed. This method is more comprehensive and may suit those with more complex finances or higher turnover.
Under cash basis accounting, you only record income and expenses when money is actually received or paid. This is simpler for many small businesses and helps manage cash flow more clearly, especially for those without a dedicated accountant. Your choice of accounting method can affect how and when you claim certain expenses, especially around buying vehicles, so it’s important to consider this when planning your financial year.
Benefits of Tax Planning Throughout the Year
Tax planning shouldn’t be left to the last minute. By reviewing your income and expenses throughout the year, you can identify patterns, adjust your spending, and ensure you’re setting enough aside for your tax bill.
Regular reviews can also help you spot additional allowable expenses you might not have claimed in the past. This is particularly important for couriers and delivery drivers whose expenses can vary significantly month to month. Using digital tools or spreadsheets to monitor business expenses in real-time helps keep you organised and reduces the risk of under-claiming.
Claiming Vehicle Costs, Fuel, and Mileage
For most self-employed couriers and delivery drivers, the single largest business asset they use is their vehicle. Whether it’s a van, car, or motorbike, your vehicle is critical to the work you do each day. That’s why understanding how to claim back costs related to your vehicle is essential if you want to maximise your allowable expenses and reduce your tax liability.
We’ll explore all the vehicle-related costs that couriers and drivers can claim, including repairs, road tax, and leasing. We’ll also explain the difference between claiming actual vehicle costs and using the mileage allowance method, as well as how to decide which method suits your business best.
Importance of Vehicle Expense Claims
Since your vehicle is directly tied to your work as a courier or delivery driver, most of its operational costs are considered allowable business expenses. However, you must follow the rules set out by HMRC. You can only claim costs that relate to business use, and if the vehicle is used for both personal and work purposes, you’ll need to calculate the proportion of time or mileage it’s used for business.
For example, if you use your van 80 percent of the time for deliveries and 20 percent for personal use, you can only claim 80 percent of the vehicle-related expenses. These expenses may include fuel, maintenance, insurance, and more. Accurately recording your mileage and expenses throughout the year will ensure you are able to support any claims you make and avoid problems in the event of a tax investigation or review.
Allowable Vehicle Costs for Couriers
A wide range of vehicle-related expenses can be claimed if they are incurred in the course of your delivery work. These may vary depending on how your business is structured and how much of the vehicle’s usage is for business purposes. Common allowable vehicle expenses include:
- Fuel costs such as petrol or diesel
- Vehicle servicing, repairs, and maintenance
- MOT test fees
- Road tax
- Vehicle insurance, including any specialist courier insurance
- Breakdown cover or roadside assistance memberships
- Parking charges while making deliveries
- Toll road fees when travelling on business
- Loan interest if you took out finance to purchase your business vehicle
- Lease or rental costs if you hire a van or car for work
If you purchase your vehicle outright, the method you use to record your accounts (cash basis or traditional accounting) will affect how you claim this cost. For now, the focus remains on day-to-day operating expenses, which are deductible from your income when calculating your taxable profit.
What You Can’t Claim as Vehicle Expenses
Not all vehicle costs are considered allowable, and making incorrect claims could result in penalties or rejected expense deductions. Some common costs that you cannot claim as vehicle-related expenses include:
- Parking fines or penalty charge notices
- Speeding fines or traffic violation penalties
- Personal journeys, including commuting to a single permanent location
- General wear and tear for personal use
- Clothing worn while driving, unless it is branded or protective workwear
- Meals and drinks consumed while working
To avoid confusion, it is advisable to separate your personal expenses from business costs. Keeping a dedicated business bank account can help maintain clarity in your records.
Two Main Ways to Claim Vehicle Costs
HMRC provides two primary methods for claiming vehicle-related expenses: the actual cost method and the flat-rate mileage allowance method. You must choose one or the other for each vehicle and stick to that method consistently while you use that vehicle.
Claiming Actual Vehicle Costs
Under this method, you calculate your actual expenses during the tax year and claim the business-use percentage of each cost. This includes fuel, servicing, repairs, tax, insurance, and more. If you use your car or van exclusively for deliveries, you can claim the full cost of running the vehicle.
However, if the vehicle is used for both business and personal purposes, you must keep a log of mileage or another reasonable measure to calculate how much of each cost is eligible for tax relief. A good practice is to keep a mileage diary or use a digital tracking tool to record the miles travelled for business.
Advantages of the actual cost method include the ability to claim for high vehicle running costs. However, this method requires detailed record keeping, and you must retain receipts for every expense.
Claiming Mileage Allowance
The flat-rate mileage scheme offers a simpler alternative. Instead of claiming each vehicle cost individually, you track your business mileage and apply HMRC’s approved rates. These are:
- 45p per mile for the first 10,000 business miles in a tax year for cars and vans
- 25p per mile for additional business miles beyond 10,000
- 24p per mile for motorcycles, regardless of mileage
You cannot use this method if you have already claimed capital allowances or actual costs for the same vehicle in previous years. Once you choose to use mileage rates for a vehicle, you must continue doing so for as long as you use it in your business.
The main advantage of using mileage allowance is the simplicity. You only need to record your mileage and do not need to keep receipts for fuel, servicing, or other vehicle expenses. However, if your vehicle expenses are higher than the standard mileage rates, you might be better off using the actual cost method.
How to Choose Between the Two Methods
Choosing between the mileage allowance and actual cost method depends on your driving habits, the type of vehicle you use, and your willingness to maintain detailed records.
If your business mileage is relatively low and your vehicle is economical to run, the mileage allowance may provide a reasonable deduction with much less paperwork. On the other hand, if you drive long distances daily and have high maintenance costs, claiming actual vehicle costs might give you a bigger deduction.
Let’s look at an example. Suppose you drive 15,000 miles in a year for your courier work. If you use the mileage allowance method, you can claim:
- 10,000 miles x 45p = £4,500
- 5,000 miles x 25p = £1,250
- Total claim = £5,750
Now imagine your actual vehicle costs for the year include:
- Fuel = £3,900
- Insurance = £1,200
- Servicing and repairs = £1,500
- Road tax and MOT = £300
- Total costs = £6,900
If your van is used only for business, you may be able to claim the full £6,900. In this case, the actual cost method would give you a larger deduction. However, you must weigh that against the extra time and effort needed to document and manage those expenses.
Keeping Records for Mileage Claims
If you choose to use the mileage allowance method, it is important to maintain a comprehensive and up-to-date mileage log. HMRC expects you to have evidence that supports your claim. The following details should be included in your log:
- Date of the journey
- Start and end addresses
- Purpose of the trip
- Total business miles travelled
You can use a physical logbook, spreadsheet, or mobile app to keep track. Your mileage log should be updated regularly to ensure accuracy. It’s a good idea to cross-reference your mileage with job records, delivery logs, or customer orders to show that the trips were genuinely for business purposes.
Vehicle Loans and Finance Costs
If you buy a vehicle on finance, you can usually claim the interest on the loan as an allowable expense. However, the amount you can claim depends on the business-use proportion of the vehicle.
You cannot claim the capital repayment of the loan itself, only the interest charged. If the vehicle is used 70 percent for work, then 70 percent of the loan interest is considered a deductible business cost.
For lease and hire agreements, you may be able to claim part or all of the leasing costs. This depends on the CO2 emissions of the vehicle and whether any personal use is involved. Higher-emission vehicles may result in restricted claims.
Capital Allowances for Vehicle Purchases
If you purchase a vehicle outright and are using traditional accounting, you may be eligible to claim capital allowances. This allows you to deduct a portion of the vehicle’s value from your profits.
The type of allowance and the amount you can claim depend on the vehicle’s CO2 emissions and when you bought it. Cars with low or zero emissions may qualify for a 100 percent first-year allowance, meaning you can deduct the full cost in the year of purchase. Other vehicles may only qualify for writing-down allowances, which spread the deduction over several years.
If you are using cash basis accounting, you can usually only claim capital allowances on cars, and only if you are not using the mileage allowance method. Vans and other vehicles used solely for business can be treated as regular allowable expenses under this method.
Leased and Hired Vehicles
If you lease or hire a car or van for your delivery work, the rental payments are generally tax-deductible as long as the vehicle is used for business. However, if the vehicle has high CO2 emissions, only a portion of the lease cost may be deductible.
For example, under current HMRC rules, if you lease a car with CO2 emissions above a specified limit, only 85 percent of the rental payments may be allowable. This restriction is part of the government’s wider effort to encourage the use of lower-emission vehicles. Make sure to keep the lease agreement and payment records to support your claims. If the vehicle is shared for personal use, you will also need to calculate the business-use percentage and adjust your claim accordingly.
Mobile Phones and Communication Costs
Mobile phones are vital for couriers and delivery drivers. Whether used for communicating with customers, receiving job updates, navigating routes, or confirming deliveries, a mobile phone is an essential business tool. Because of this, HMRC permits a portion or all of the associated costs to be claimed as allowable expenses.
The extent of your claim depends on whether the mobile phone is used solely for work or for both personal and business use. If the mobile phone is dedicated to business and not used for any personal calls, the full cost of the handset and the monthly contract can be claimed. This includes call charges, data packages, and any maintenance or insurance plans specific to the business phone.
However, if the same phone is used for both personal and business purposes, you must work out a fair and reasonable percentage of business use. For example, if 70 percent of calls and data usage relate to delivery work, then only 70 percent of the mobile phone bill can be included as an allowable expense.
This applies whether you are on a pay-as-you-go arrangement or a monthly contract. To support your claim, it is advisable to keep a record of business-related communications, such as call logs, texts, and app usage data related to your work.
Internet and Technology Use at Home
Although couriers and delivery drivers spend much of their time on the road, some work may be carried out from home. This can include planning routes, communicating with clients or customers, tracking deliveries, managing bookings, or handling invoices and accounts. If you use your home for any of these activities, you may be able to claim a portion of your household running costs as a business expense.
Allowable home-based expenses may include a percentage of:
- Broadband internet costs
- Electricity and gas bills
- Rent or mortgage interest
- Water rates
- Council tax
- Home insurance if part of your home is used as a workspace
The amount you can claim depends on how much of your home is used for work and how long it is used each day. You will need to estimate a reasonable percentage based on actual use. For example, if you use one room in your home exclusively for business for two hours a day, five days a week, you might claim one-tenth of your monthly utility bills for those working hours.
Alternatively, HMRC allows self-employed individuals to use simplified flat rates for working from home. This method avoids the need to calculate and allocate household costs. The flat rate depends on how many hours you work from home each month and currently ranges from £10 to £26 per month. While it may be less accurate than actual calculations, it offers simplicity for those who use their home for admin-related tasks.
Insurance Policies for Couriers and Drivers
Running your own delivery business means taking responsibility for your work and the tools you use. One important area of protection is insurance. Fortunately, most work-related insurance policies are considered allowable business expenses and can be deducted from your taxable profits.
Relevant insurance costs that can be claimed include:
- Public liability insurance, which protects you against claims made by third parties for injury or property damage
- Employer’s liability insurance if you employ others in your business
- Vehicle insurance, including courier-specific or goods-in-transit cover
- Business interruption insurance
- Contents insurance for tools or devices used in your delivery work
- Professional indemnity insurance, if you offer additional services beyond delivery
When claiming insurance costs, make sure the policy is directly connected to your business activities. For example, if you take out standard personal vehicle insurance, but use the vehicle exclusively for work, the premium must include courier or commercial coverage to be classed as a business expense.
It is also important to retain policy documents, invoices, and proof of payment for your records. These serve as evidence for your claims and may be requested by HMRC in case of any review or investigation.
Administrative and Office Costs
Every self-employed business generates some level of administrative work. Even if you spend most of your working day on the road, time is still required to manage invoices, contact customers, record expenses, and plan delivery routes. There are several small but essential expenses associated with these tasks that can be claimed.
Common office-related expenses include:
- Stationery such as pens, paper, notebooks, and folders
- Printer ink and printing costs for invoices or job sheets
- Postage costs if mailing receipts or business-related items
- Cloud storage subscriptions or data backup services
- Email hosting and domain registration for business contact
- Laptop or tablet use, if used for planning, mapping, or admin
- Apps and tools used for tracking expenses, routes, or delivery schedules
These costs may seem minor individually, but over a tax year they can add up to a meaningful reduction in your taxable profits. The key rule is that the expense must be incurred solely for business use. If equipment or services are shared with personal use, only the business-use portion may be claimed.
Legal, Accounting, and Professional Services
Many self-employed individuals seek support from accountants, bookkeepers, or legal advisors during the course of running their business. These professional services are often essential for staying compliant with tax laws and properly managing financial affairs. Fortunately, the fees paid to such professionals are allowable business expenses.
Some examples of claimable professional costs include:
- Fees paid to an accountant or tax advisor for preparing your Self Assessment return
- Charges for bookkeeping or payroll services
- Legal advice relating to your business operations
- Membership fees for trade organisations or unions
- Business consultancy or coaching services
These types of expenses should always be supported by contracts, receipts, or invoices, and the services must be wholly for business purposes. Subscriptions to general-interest magazines or associations not linked to your business cannot be claimed.
Bank Charges and Financial Costs
If you maintain a separate bank account for your courier business, any fees associated with that account may be treated as allowable expenses. This includes monthly service charges, transaction fees, overdraft charges, or direct debit fees. However, this only applies to accounts and financial services used for your business.
If you use a personal account for both personal and business purposes, you must calculate and claim only the portion relating to your courier income and expenses. Some self-employed drivers also use digital payment systems or money transfer services to collect payments. Any fees paid to these services are deductible. You may also claim interest on business loans or financing used to purchase vehicles or equipment. Only the interest portion of the loan repayment is deductible, not the capital amount.
Training and Skill Development
Although not common in all cases, some delivery drivers may choose to undertake additional training to improve their skills or comply with industry regulations. Depending on the nature of the training and how directly it supports your current business, the cost may be allowable.
Allowable training expenses may include:
- First aid certification relevant to delivery work
- Health and safety courses required for certain clients or contracts
- Navigation or logistics training
- Industry-recognised driving courses
- Online courses or seminars related to delivery operations or business management
The training must be relevant to your existing business and not related to acquiring entirely new skills unrelated to your current work. For example, a delivery driver taking a photography course would not be able to claim the cost, whereas a navigation and logistics course would be acceptable.
Clothing and Workwear
There is often confusion around whether clothing can be claimed as a business expense. The general rule is that everyday clothing, even if worn for work, is not an allowable expense. However, specialist workwear that is essential for your job and not suitable for everyday wear may be claimed.
Examples of allowable clothing expenses include:
- High-visibility jackets or safety vests
- Branded uniform required by a delivery company
- Protective footwear such as steel-toe boots
- Gloves or outerwear used exclusively for work in adverse weather
Receipts and purchase details should be kept for all such clothing items, and they should only be claimed if they are purchased specifically for delivery work and not used personally.
Staying Compliant with HMRC
Claiming business expenses as a self-employed delivery driver is your legal right, but it must be done correctly. The best approach is to claim only what you can justify and support with documentation. Keeping detailed records of income and expenses, saving receipts, and maintaining a digital or written logbook will help protect your business in the event of an audit.
You should also be cautious about inflating claims or including non-business costs. HMRC may investigate returns that show unusually high expenses or inconsistent figures from one year to the next. If you are ever unsure about what can or cannot be claimed, it’s advisable to seek professional advice rather than guess.
The responsibility for accurate reporting lies with you as the business owner. Taking the time to understand the rules, keep good records, and submit an honest return can save you from unnecessary stress and financial penalties.
Conclusion
Working as a self-employed courier or delivery driver offers flexibility, independence, and access to a growing market of opportunities. But along with the freedom of setting your own schedule and choosing your clients comes the responsibility of managing your own taxes. Understanding what you can legitimately claim as allowable expenses is essential for staying compliant with HMRC while making sure you don’t pay more tax than necessary.
Throughout this series, we’ve explored the key areas you need to be aware of. From your initial registration for Self Assessment and understanding your tax obligations, to the wide range of deductible costs associated with vehicle use, mobile communications, insurance, home-based work, and other business essentials—every claim you make can directly reduce your tax liability and improve your take-home income.
By choosing the right method for claiming vehicle costs—whether it’s the flat-rate mileage scheme or actual cost tracking—you can tailor your approach based on your driving habits and record-keeping preferences. Being aware of the rules around part-business and part-personal use ensures your claims are realistic and defendable. Similarly, understanding when and how to claim for technology, insurance, professional services, and other administrative costs can make a substantial difference to your taxable profits.
The key to success lies in maintaining clear and accurate records. Whether you track mileage using an app, keep digital copies of your receipts, or maintain a spreadsheet of your expenses, consistency and detail will always work in your favour. Making time to regularly review your income and expenditure throughout the year will not only keep you organised but also help you identify any potential deductions you may have missed.
Ultimately, self-employment places you in control of your business and your financial outcomes. By using the tax system to your advantage—legitimately and transparently—you can increase your profit margins and reduce unnecessary costs. Claiming allowable expenses isn’t about finding loopholes; it’s about operating efficiently, planning wisely, and ensuring your hard work delivers the best possible financial return. If you take the time to understand the rules and apply them accurately, you’ll not only remain compliant but also be in a stronger position to grow and sustain your courier or delivery business over the long term.